1-1 By: Hochberg (Senate Sponsor - Cain) H.B. No. 2383
1-2 (In the Senate - Received from the House May 16, 1997;
1-3 May 16, 1997, read first time and referred to Committee on Finance;
1-4 May 18, 1997, reported favorably by the following vote: Yeas 9,
1-5 Nays 0; May 18, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the qualification of a nonprofit charitable or
1-9 religious organization, school, or youth association for an
1-10 exemption from ad valorem taxation.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 11.18(f), Tax Code, is amended to read as
1-13 follows:
1-14 (f) A charitable organization must:
1-15 (1) use its assets in performing the organization's
1-16 charitable functions or the charitable functions of another
1-17 charitable organization; and
1-18 (2) [,] by charter, bylaw, or other regulation adopted
1-19 by the organization to govern its affairs[:]
1-20 [(1) pledge its assets for use in performing the
1-21 organization's charitable functions; and]
1-22 [(2)] direct that on discontinuance of the
1-23 organization by dissolution or otherwise:
1-24 (A) the assets are to be transferred to this
1-25 state, the United States, or [to] an educational, religious,
1-26 charitable, or other similar organization that is qualified as a
1-27 charitable organization under Section 501(c)(3), Internal Revenue
1-28 Code of 1986, as amended; or
1-29 (B) if required for the organization to qualify
1-30 as a tax-exempt organization under Section 501(c)(12), Internal
1-31 Revenue Code of 1986, as amended, the assets are to be transferred
1-32 directly to the organization's members, each of whom, by
1-33 application for an acceptance of membership in the organization,
1-34 has agreed to immediately transfer those assets to this state or to
1-35 an educational, religious, charitable, or other similar
1-36 organization that is qualified as a charitable organization under
1-37 Section 501(c)(3), Internal Revenue Code of 1986, as amended, as
1-38 designated in the bylaws, charter, or regulation adopted by the
1-39 organization.
1-40 SECTION 2. Section 11.19(d), Tax Code, is amended to read as
1-41 follows:
1-42 (d) To qualify as a youth development association for the
1-43 purposes of this section, an association must:
1-44 (1) be organized and operated [engage] primarily for
1-45 the purpose of [in] promoting the threefold spiritual, mental, and
1-46 physical development of boys, girls, young men, or young women;
1-47 (2) be operated in a way that does not result in
1-48 accrual of distributable profits, realization of private gain
1-49 resulting from payment of compensation in excess of a reasonable
1-50 allowance for salary or other compensation for services rendered,
1-51 or realization of any other form of private gain;
1-52 (3) operate in conjunction with a state or national
1-53 organization that is organized and operated for the same purpose as
1-54 the association; [and]
1-55 (4) use its assets in performing the association's
1-56 youth development functions or the youth development functions of
1-57 another youth development association; and
1-58 (5) by charter, bylaw, or other regulation adopted by
1-59 the association to govern its affairs[:]
1-60 [(A) pledge its assets for use in performing the
1-61 association's youth development functions; and]
1-62 [(B)] direct that on discontinuance of the
1-63 association by dissolution or otherwise the assets are to be
1-64 transferred to this state, the United States, or [to] a charitable,
2-1 educational, religious, or other similar organization that is
2-2 qualified as a charitable organization under Section 501(c)(3),
2-3 Internal Revenue Code of 1954, as amended.
2-4 SECTION 3. Section 11.20(c), Tax Code, is amended to read as
2-5 follows:
2-6 (c) To qualify as a religious organization for the purposes
2-7 of this section, an organization (whether operated by an
2-8 individual, as a corporation, or as an association) must:
2-9 (1) be organized and operated primarily for the
2-10 purpose of engaging in religious worship or promoting the spiritual
2-11 development or well-being of individuals;
2-12 (2) be operated in a way that does not result in
2-13 accrual of distributable profits, realization of private gain
2-14 resulting from payment of compensation in excess of a reasonable
2-15 allowance for salary or other compensation for services rendered,
2-16 or realization of any other form of private gain; [and]
2-17 (3) use its assets in performing the organization's
2-18 religious functions or the religious functions of another religious
2-19 organization; and
2-20 (4) by charter, bylaw, or other regulation adopted by
2-21 the organization to govern its affairs[:]
2-22 [(A) pledge its assets for use in performing the
2-23 organization's religious functions; and]
2-24 [(B)] direct that on discontinuance of the
2-25 organization by dissolution or otherwise the assets are to be
2-26 transferred to this state, the United States, or [to] a charitable,
2-27 educational, religious, or other similar organization that is
2-28 qualified as a charitable organization under Section 501(c)(3),
2-29 Internal Revenue Code of 1954, as amended.
2-30 SECTION 4. Section 11.21(d), Tax Code, is amended to read as
2-31 follows:
2-32 (d) To qualify as a school for the purposes of this section,
2-33 an organization (whether operated by an individual, as a
2-34 corporation, or as an association) must:
2-35 (1) be organized and operated primarily for the
2-36 purpose of engaging in educational functions;
2-37 (2) normally maintain a regular faculty and curriculum
2-38 and normally have a regularly organized body of students in
2-39 attendance at the place where its educational functions are carried
2-40 on;
2-41 (3) [(2)] be operated in a way that does not result in
2-42 accrual of distributable profits, realization of private gain
2-43 resulting from payment of compensation in excess of a reasonable
2-44 allowance for salary or other compensation for services rendered,
2-45 or realization of any other form of private gain and, if the
2-46 organization is a corporation, be organized as a nonprofit
2-47 corporation as defined by the Texas Non-Profit Corporation Act;
2-48 [and]
2-49 (4) use its assets in performing the organization's
2-50 educational functions or the educational functions of another
2-51 educational organization; and
2-52 (5) [(3)] by charter, bylaw, or other regulation
2-53 adopted by the organization to govern its affairs[:]
2-54 [(A) pledge its assets for use in performing the
2-55 organization's educational functions; and]
2-56 [(B)] direct that on discontinuance of the
2-57 organization by dissolution or otherwise the assets are to be
2-58 transferred to this state, the United States, or [to] an
2-59 educational, charitable, religious, or other similar organization
2-60 that is qualified as a charitable organization under Section
2-61 501(c)(3), Internal Revenue Code of 1954, as amended.
2-62 SECTION 5. Sections 11.421 and 11.422, Tax Code, are amended
2-63 to read as follows:
2-64 Sec. 11.421. QUALIFICATION OF RELIGIOUS ORGANIZATION.
2-65 (a) If the chief appraiser denies a timely filed application for
2-66 an exemption under Section 11.20 [of this code] for an organization
2-67 that otherwise qualified for the exemption on January 1 of the year
2-68 but that did not satisfy the requirements of Subsection (c)(4)
2-69 [(c)(3)] of that section on that date, the organization is eligible
3-1 for the exemption for the tax year if the organization:
3-2 (1) satisfies the requirements of Section 11.20(c)(4)
3-3 [11.20(c)(3) of this code] before the later of [the following
3-4 dates]:
3-5 (A) June 1 of the year to which the exemption
3-6 applies; or
3-7 (B) the 60th [30th] day after the date the chief
3-8 appraiser notifies the organization of its failure to comply with
3-9 those requirements; and
3-10 (2) within the time provided by Subdivision (1) [of
3-11 this subsection] files with the chief appraiser a new completed
3-12 application for the exemption together with an affidavit stating
3-13 that the organization has complied with the requirements of Section
3-14 11.20(c)(4) [11.20(c)(3) of this code].
3-15 (b) If the chief appraiser cancels an exemption for a
3-16 religious organization under Section 11.20 [of this code] that was
3-17 erroneously allowed in a tax year because he determines that the
3-18 organization did not satisfy the requirements of Section
3-19 11.20(c)(4) [11.20(c)(3)] on January 1 of that year, the
3-20 organization is eligible for the exemption for that tax year if the
3-21 organization:
3-22 (1) was otherwise qualified for the exemption;
3-23 (2) satisfies the requirements of Section 11.20(c)(4)
3-24 [11.20(c)(3) of this code] on or before the 60th [30th] day after
3-25 the date the chief appraiser notifies the organization of the
3-26 cancellation; and
3-27 (3) within the time provided by Subdivision (2) [of
3-28 this subsection] files with the chief appraiser a new completed
3-29 application for the exemption together with an affidavit stating
3-30 that the organization has complied with the requirements of Section
3-31 11.20(c)(4) [11.20(c)(3) of this code].
3-32 Sec. 11.422. QUALIFICATIONS OF A SCHOOL. (a) If the chief
3-33 appraiser denies a timely filed application for an exemption under
3-34 Section 11.21 [of this code] for a school that otherwise qualified
3-35 for the exemption on January 1 of the year but that did not satisfy
3-36 the requirements of Subsection (d)(5) [(d)(3)] of that section on
3-37 that date, the school is eligible for the exemption for the tax
3-38 year if the school:
3-39 (1) satisfies the requirements of Section 11.21(d)(5)
3-40 [11.21(d)(3) of this code] before the later of [the following
3-41 dates]:
3-42 (A) July 1 of the year for which the exemption
3-43 applies; or
3-44 (B) the 60th [30th] day after the date the chief
3-45 appraiser notifies the school of its failure to comply with those
3-46 requirements; and
3-47 (2) within the time provided by Subdivision (1) [of
3-48 this subsection], files with the chief appraiser a new completed
3-49 application for the exemption together with an affidavit stating
3-50 that the school has complied with the requirements of Section
3-51 11.21(d)(5) [11.21(d)(3) of this code].
3-52 (b) If the chief appraiser cancels an exemption for a school
3-53 under Section 11.21 [of this code] that was erroneously allowed in
3-54 a tax year because the appraiser determines that the school did not
3-55 satisfy the requirements of Section 11.21(d)(5) [11.21(d)(3) of
3-56 this code] on January 1 of that year, the school is eligible for
3-57 the exemption for that tax year if the school:
3-58 (1) was otherwise qualified for the exemption;
3-59 (2) satisfies the requirements of Section 11.21(d)(5)
3-60 [11.21(d)(3) of this code] on or before the 30th day after the date
3-61 the chief appraiser notifies the school of the cancellation; and
3-62 (3) in the time provided in Subdivision (2) [of this
3-63 subsection] files with the chief appraiser a new completed
3-64 application stating that the school has complied with the
3-65 requirements of Section 11.21(d)(5) [11.21(d)(3) of this code].
3-66 SECTION 6. Subchapter C, Chapter 11, Tax Code, is amended by
3-67 adding Sections 11.423 and 11.424 to read as follows:
3-68 Sec. 11.423. QUALIFICATION OF CHARITABLE ORGANIZATION OR
3-69 YOUTH ASSOCIATION. (a) If the chief appraiser denies a timely
4-1 filed application for an exemption under Section 11.18 or 11.19 for
4-2 an organization or association that otherwise qualified for the
4-3 exemption on January 1 of the year but that did not satisfy the
4-4 requirements of Section 11.18(f)(2) or 11.19(d)(5), as appropriate,
4-5 on that date, the organization or association is eligible for the
4-6 exemption for the tax year if the organization or association:
4-7 (1) satisfies the requirements of Section 11.18(f)(2)
4-8 or 11.19(d)(5), as appropriate, before the later of:
4-9 (A) June 1 of the year to which the exemption
4-10 applies; or
4-11 (B) the 60th day after the date the chief
4-12 appraiser notifies the organization or association of its failure
4-13 to comply with those requirements; and
4-14 (2) within the time provided by Subdivision (1) files
4-15 with the chief appraiser a new completed application for the
4-16 exemption together with an affidavit stating that the organization
4-17 or association has complied with the requirements of Section
4-18 11.18(f)(2) or 11.19(d)(5), as appropriate.
4-19 (b) If the chief appraiser cancels an exemption for an
4-20 organization or association under Section 11.18 or 11.19 that was
4-21 erroneously allowed in a tax year because the chief appraiser
4-22 determines that the organization or association did not satisfy the
4-23 requirements of Section 11.18(f)(2) or 11.19(d)(5), as appropriate,
4-24 on January 1 of that year, the organization or association is
4-25 eligible for the exemption for that tax year if the organization or
4-26 association:
4-27 (1) was otherwise qualified for the exemption;
4-28 (2) satisfies the requirements of Section 11.18(f)(2)
4-29 or 11.19(d)(5), as appropriate, on or before the 60th day after the
4-30 date the chief appraiser notifies the organization or association
4-31 of the cancellation; and
4-32 (3) within the time provided by Subdivision (2) files
4-33 with the chief appraiser a new completed application for the
4-34 exemption together with an affidavit stating that the organization
4-35 or association has complied with the requirements of Section
4-36 11.18(f)(2) or 11.19(d)(5), as appropriate.
4-37 Sec. 11.424. CONFLICT BETWEEN GOVERNING REGULATION OF
4-38 NONPROFIT ORGANIZATION, ASSOCIATION, OR ENTITY AND CONTRACT WITH
4-39 UNITED STATES. To the extent of a conflict between a provision in
4-40 a contract entered into by an organization, association, or entity
4-41 with the United States and a provision in the charter, a bylaw, or
4-42 other regulation adopted by the organization or entity to govern
4-43 its affairs in compliance with Section 11.18(f)(2), 11.19(d)(5),
4-44 11.20(c)(4), or 11.21(d)(5), the existence of the contract or the
4-45 organization's compliance with the contract does not affect the
4-46 eligibility of the organization, association, or entity to receive
4-47 an exemption under the applicable section of this code, and the
4-48 organization, association, or entity may comply with the provision
4-49 in the contract instead of the conflicting provision in the
4-50 charter, bylaw, or other regulation.
4-51 SECTION 7. Section 11.434(d), Tax Code, is amended to read
4-52 as follows:
4-53 (d) An application may not be filed under this section after
4-54 December 31, 1997 [1992].
4-55 SECTION 8. Section 23.55(j), Tax Code, as added by Chapter
4-56 471, Acts of the 74th Legislature, Regular Session, 1995, applies
4-57 to a change of use of land:
4-58 (1) on or after June 12, 1995; or
4-59 (2) before June 12, 1995, if:
4-60 (A) the change of use occurred on or after June
4-61 12, 1990; and
4-62 (B) on June 12, 1995, the owner of the land had
4-63 not been determined to be liable for the sanctions provided by
4-64 Section 23.55(a), Tax Code, by a final and nonappealable order or
4-65 judgment.
4-66 SECTION 9. The importance of this legislation and the
4-67 crowded condition of the calendars in both houses create an
4-68 emergency and an imperative public necessity that the
4-69 constitutional rule requiring bills to be read on three several
5-1 days in each house be suspended, and this rule is hereby suspended,
5-2 and that this Act take effect and be in force from and after its
5-3 passage, and it is so enacted.
5-4 * * * * *